STRENGTHS

Diversified economy, compared with those of other oil-exporting countries

Ongoing efforts to modernise infrastructure

Member of the Central Africa Economic and Monetary Community (CEMAC) and the Economic Community of Central African States (ECCAS)

WEAKNESSES

External and public accounts dependent on hydrocarbons

Non-inclusive growth; business environment remains difficult

Heightened political risk: insecurity in the far north of the country and increasing tensions in the northwest and southwest regions between the English-speaking minority and the mainly French-speaking regime

Risk assessment

Gas and construction to support activity

Growth is expected to remain strong in 2020. It will be fuelled by non-oil sectors, as oil production is set to continue declining as a result of low investment in new projects since 2014 and the depletion of resources. The decline in oil production will, however, be offset by the ramp-up in liquefied natural gas (LNG) production at the Hili Epsiseyo offshore unit off Kribi. The secondary sector should benefit from the strong growth in construction, thanks to investments in a host of infrastructure projects, such as the extension of the deepwater port of Kribi and construction of the Nachtigal hydroelectric power plant (a PPP with EDF and the IFC). Transport infrastructure, particularly road transport infrastructure, will also benefit from investments made with a view to organising the African Cup of Nations (CAN) football tournament in 2021. The country's electricity capacity is expected to continue to increase, notably with the commissioning of the Lom-Pangar hydroelectric dam in June 2019, boosting not only the energy sector but also manufacturing, wood processing and agro-industry activities. The latter will support agricultural production, which will also benefit from efforts to improve the sector's productivity (introduction of higher-yielding varieties, in particular). However, coffee and cocoa production, mainly in the English-speaking regions, is expected to continue to suffer from the ongoing political crisis. Industrial activity, which is almost at a standstill in these regions, will likely feel the effects as well. Service sectors, particularly finance and banking, are expected to expand vigorously in 2020.

Persistent fiscal challenges

The consolidation of public accounts is expected to continue under the three-year Extended Credit Facility (ECF) of 2% of GDP granted by the IMF in mid-2017. While oil revenues will continue to decline, non-oil revenues will increase thanks to increased LNG revenues and reforms to remove tax shelters, notably through the reduction of VAT exemptions (1.7% of GDP). Security spending, particularly related to the ongoing conflict in the English-speaking regions, will nevertheless continue to put pressure on the budget. The use of non-concessional external debt to finance some projects has worsened the debt risk profile.

The current account balance will improve only marginally in 2020. The trade balance will remain in deficit, despite dynamic LNG and timber exports, due to massive imports of capital goods and services needed to carry out projects. Agricultural exports will be affected by the downturn in production in the English-speaking regions. In addition, the closure of the country's only refinery (SONARA), following a fire in June, forced the country to increase its fuel imports until the restoration of operational capacity. FDI flows (2% of GDP), despite increasing to finance infrastructure projects, particularly under public-private partnerships, will not be enough to finance the current account deficit, and the country will have to resort to debt. Besides IMF support through the ECF, borrowing will be mainly from multilateral donors.

The “Sphinx of Etoudi” faces a crisis in English-speaking regions

In power since 1982, Paul Biya was re-elected at 86 for a seventh consecutive term in the presidential elections of October 2018, taking more than 71% of the vote. Despite accusations of fraud and contestation of the result, the man nicknamed the “Sphinx of Etoudi” for his discreet public profile retains his grip on power. Even so, the 14-point drop in the voter turnout rate (54%) compared with 2011 reflects the country's growing fragmentation, with 90% abstention in English-speaking regions (southwest, northwest). The low turnout stems from the deterioration in the political and security situation in these regions since the end of 2016. Clashes between the army and separatists intensified in 2018 and forced more than 530,000 people into exile. Human rights violations perpetrated by the army are being increasingly denounced by the international community and prompted Cameroon’s withdrawal from the AGOA regime by the United States in November 2019, sending a strong political message. Stability is also being undermined in the far north by the activities of Boko Haram, an Islamist terrorist group. The next parliamentary elections, initially scheduled for November 2019, have been postponed to 2020 due to the tense climate in the country. The ruling party, the Rassemblement démocratique du peuple camerounais (RDPC), is expected to retain its majority but could lose ground in the face of general discontent, which the “great national dialogue” organised by the President at the end of September 2019 has failed to soothe. Maurice Kamto, the government’s main opponent, who had been imprisoned after taking part in a protest against the outcome of the presidential election, was released in the hope of restoring calm.

The business climate suffers from a complex institutional and regulatory environment, as evidenced by the country’s 167th place (out of 190 countries) in the 2020 Doing Business ranking, and from the prevalence of corruption.